California Foreclosure Prevention Act

The California Foreclosure Prevention Act goes into effect June 15, 2009.

Civil Code Section 2923.52 requires an additional 90 day period beyond the period already provided before a Notice of Sale can be given. The purpose of this is to allow all parties to pursue a loan modification to prevent foreclosure of loans meeting certain criteria.

Sounds good, right?

Well maybe, maybe not.

A mortgage loan servicer who has implemented a comprehensive loan modificationprogram may file an application for exemption from the provisions of this law. So maybe it is not quite accurate to say that this is a foreclosure moratorium law. As I've written about elsewhere, much of what passes for action to solve the housing crisis is little more than photo ops and ill conceived plans by those who are not involved in the process on a day to day basis.

One of the criticisms of this law is that the vast majority of large servicers should have no trouble complying as they have already implemented similar requirements at the federal level in order to comply with the Obama administrations Making Home Affordable Program that began in March.

Here's what will happen starting Monday:

• Lenders will submit applications to the state outlining their loan mod programs and thus getting them an immediate 30 day exemption.

• If the lender's program is approved, the lender is permanently exempt.

• If the program is reject by the state, the lender has 30 days to resubmit.

So, I'm not exactly sure what this program will accomplish except the appearance of doing something.

For those interested in actually implementing ideas that may make a difference, try some of these on for size:

• Streamline the short sale process. Make lenders comply with mandatory 45 day turnaround time for complete package.

• Certify a limited number of licensees to transact short sale business so that packages are complete.

• True Foreclosure Moratorium - no new foreclosures for 120 days, no exceptions.

• All lenders must write down the outstanding loan balances by 15%

• True government subsidized 4% 30 year fixed mortgages.

Too extreme, too costly, too radical? The consequences of allowing the current situation to play out are far more extreme.